K-Tel International has fallen victim to its own old motto: "Not sold in stores."

After going through an accelerated renaissance and collapse as an Internet
player, the 32-year-old direct-mail music company's stock, which racked up
seven years of public trading, will no longer be sold on any major exchange.

"It was a big disappointment for everyone because this company has been
listed for so many years on the Nasdaq," said K-Tel chief financial officer Merrill Ayers.

Welcome to the dark side of
the high-flying securities industry, a far cry from the perception of instant wealth that has made Nasdaq a household word in recent years. Nearly 500 companies have been delisted from the Nasdaq
in the last 18 months for regulatory reasons. Through July, 92 stocks were delisted; last year, 400 stocks were dumped from the index.

Being delisted is, in essence, a death sentence for companies, sapping their cash flow, publicity and recruiting power. Untold numbers of ex-Nasdaq dwellers wither into obscurity, with little to no chance of returning to a national exchange.

"When a company is delisted, there is a general lack of enthusiasm for it
in the investment community," said J.C. Simbana, an analyst at investment
firm Moors & Cabot in San Francisco. "It's almost like it disappears into
the shadows."

Although such heavyweights as Intel and Oracle are often equated with the Nasdaq, thousands of much smaller companies constitute something of a
silent majority of the tech-laden exchange. Despite their numbers, however,
these lesser-known companies routinely get swept up--or down--in the tidal
waves of daily investor action driven by news from the largest technology
corporations. And while the Microsofts of the world can sustain vast swings
in their share prices, one bad day can push a small business one step
closer to being pulled off the Nasdaq altogether.

Businesses are first slapped with a warning after their shares sink to less
than $1 or $5, depending on the stock, for more than 30 days. For companies to return to the Nasdaq's good graces and keep their seats on the exchange, their shares must trade above the minimum bid price for 10 consecutive days during the next 90 days.

Despite the money and faith invested in their business plans, CEOs, founders and employees face the possibility of being left essentially powerless by a delisting, with no control over their stock price. When these businesses waver precariously close to that critical line, executives are only able to watch and pray that a heavyweight's earnings, the latest from Federal Reserve Chairman Alan Greenspan, or an out-of-the-blue upswing will rescue them.

Once the ax falls, companies head to the OTC (over-the-counter) Bulletin Board--an exchange run by the National Association of Securities Dealers and a virtual no-man's-land for most companies that have been delisted. The OTCBB is a regulated quotation service that displays real-time quotes, prices and volume information for the more than 3,500 small-capitalization companies traded over the counter.

There, companies not only hold little hope of returning to the Nasdaq but
also get the cold shoulder from investors, analysts and the public
spotlight. Net companies in particular crave this visibility to attract
investors, customers and even employees.

It is a particularly humbling experience for a company as ingrained in American popular culture as K-Tel, which wooed a generation of consumers by touting its music compilation records on late-night television in the '70s.

"When you are on the Nasdaq, you are more in the limelight. Or, I should say, you have more visibility in the investor community,
which is important in enhancing your company's name in that important community," Ayers said.

The company's stock, listed on the Nasdaq Stock Market since July 1993, stagnated in the $5-a-share range until the company latched onto the e-commerce boom in 1998. The shares, which hit a high of $32.63 during the euphoric early days of e-tailing, faded fast along with the rest of the sector when investors began to question whether these stocks could live up to the hype.

Earlier this summer, the Nasdaq warned K-Tel that it would boot the company
from its exchange unless it was able to meet the requirements to stay
listed, including maintaining a stock price of at least $5 and holding its
revenues at $50,000 or more.

K-Tel appealed the delisting with the Nasdaq and applied to be
listed under the less rigorous requirements of a small cap company--those with an initial market value of $5 million. But its brief Net venture had
taken its toll. Guilt by association unraveled the staying power that K-Tel had methodically built since its inception. The stock was delisted from the Nasdaq late last month.

"Employee morale is still, of course, difficult to maintain," Ayers said. "No one is happy with what has happened." K-Tel hopes its core employees
will support the company's efforts to reverse its slide, which includes
restructuring and layoffs.

The consequences of being delisted are not confined to the company itself.
Both individual and institutional investors, such as pensions and mutual funds, often get stuck with nearly worthless stock.

"Most large institutional investors have criteria that don't allow them to
hold a stock if it is trading below a certain value," Simbana said. "But it
is very difficult for a retail investor who jumped on a stock with high
expectations and pie-in-the-sky projections."

Most investment experts recommend investors dump stocks before they get
delisted and take a capital-loss tax break. As individuals close their
pocketbooks, a flailing stock's chance of staying on a major exchange narrows even more. Its trading power plummets when a company is banished to the OTCBB.

"We certainly won't buy any more (shares) once it goes to the
over-the-counter," said Henry Gray, portfolio manager at Dimension Fund
Advisors--the largest shareholder of ITC Learning, which was delisted a day before K-Tel fell off the market.

The OTCBB is seen as a "minefield" for the new or independent investors who
have been fueling the stock market craze as they learn to trade online,
said Mark Robertson, a senior contributing editor of Better Investing
Magazine, the publication of the National Association of Investors, a
nonprofit investment education organization for individuals.

Major online trading sites such as Datek Online and Ameritrade that allow
customers to trade OTC stocks do so only reluctantly--and with plenty of warnings.

"We told our customers: You asked for it, so here it is, but be very
careful," Datek Online spokesman Michael Dunn said.

Companies relegated to the OTCBB dream of returning to a national market. But once a company has sunk from the OTCBB to the "pink sheets," where stocks are listed on plain paper rather than electronically, the hope of returning to the Nasdaq is lost.

While conceding losing some investor interest, Ayers is optimistic about
keeping K-Tel on consumers' radars.

"We still have good products and a brand name that is well-known in several
markets," Ayers said. "Hopefully consumers will come to our site and find
K-Tel products with or without a Nasdaq listing."

The factors that cause a stock to be yanked from the Nasdaq vary, depending on the individual company and the way it was first listed on the exchange. Here are a few of the main reasons a stock can lose its seat on the market:

 Share price drops below minimum bid price of either $5 or $1 for 30 consecutive days Total revenues plus either market cap or net assets fall below $50 million (for some companies) Stock doesn't have minimum number of market makers* Stock doesn't trade at minimum bid price for 10 consecutive days during the 90 days following a delisting warning

You can also be delisted if you

 are acquired by another company declare bankruptcy move to another exchange, like the NYSE don't keep your required filings up to date

* a stock dealer who maintains "bid" prices and "ask" prices in a stock by buying or selling 100-share lots.